Federal Mortgage Laws and Regulations

It is illegal to give or accept a fee, kickback, or thing of value in exchange for referring settlement-service business; only payment for services actually performed is allowed. A violator may be fined up to $10,000 or imprisoned for up to 1 year, or both.

Lenders must disclose the finance charge and annual percentage rate so borrowers can compare the true cost of credit across offers. A disclosed APR is accurate if it is within one-eighth of 1 percentage point of the true rate on a regular transaction, and within one-quarter of 1 percentage point on an irregular one.

The Loan Estimate must be delivered or placed in the mail no later than 3 business days after the creditor receives the application, and no later than 7 business days before consummation. A Loan Estimate that is mailed rather than handed over is treated as received 3 business days after it is mailed.

The borrower must receive the Closing Disclosure no later than 3 business days before consummation. Only three late changes restart that clock: an inaccurate APR, a changed loan product, or an added prepayment penalty. An event within 30 days after consummation that changes an amount the borrower paid requires corrected disclosures within 30 days.

Charges the creditor controls, including its own fees, carry a zero tolerance and may not increase at closing. Charges for recording and for third-party services the borrower was permitted to shop for are in good faith if the aggregate rises by no more than 10% above the Loan Estimate.

A creditor must keep evidence of Regulation Z compliance for 2 years, evidence of compliance with the Loan Estimate and Closing Disclosure rules for 3 years after consummation, and each completed Closing Disclosure itself for 5 years after consummation.

A lender may not discriminate against an applicant based on race, color, religion, national origin, sex, marital status, age, or because income comes from public assistance. The creditor must keep the application and related records for 25 months after notifying the applicant of the action taken.

When credit is denied or approved on different terms, the applicant must receive a written adverse action notice explaining the decision within 30 days of a completed application. The same 30 days applies to adverse action on an incomplete application, and a counteroffer the applicant neither accepts nor uses becomes adverse action after 90 days.

An institution becomes a HMDA reporter once it has originated at least 25 closed-end mortgage loans, or at least 200 open-end lines of credit, in each of the two preceding calendar years. It must file its loan/application register with the regulator by March 1 following the collection year and keep a copy for at least 3 years.

Consumer report data must be accurate, and borrowers may see the credit information used and receive a risk-based pricing or credit score notice. Most adverse items must drop off a report after 7 years and a bankruptcy after 10 years. A credit bureau must reinvestigate a disputed item within 30 days, extendable by 15 days when the consumer sends more information inside that window.

Financial institutions must give consumers a privacy notice describing information-sharing practices and, in many cases, a chance to opt out of certain sharing.

Institutions must maintain administrative, technical, and physical safeguards to protect customers' nonpublic personal information.

Mortgage lenders and originators must maintain an anti-money-laundering program and file a Suspicious Activity Report on any suspicious transaction that involves at least $5,000. The SAR is due no later than 30 calendar days after initial detection; where no suspect has been identified the filer may take up to 60 calendar days. The SAR and its supporting documents must be kept for 5 years.

An originator's pay may not be based on the loan's interest rate or other terms, and dual compensation from both the borrower and the lender on the same loan is prohibited. The creditor and the loan-originator organization must keep compensation records and the governing agreement for 3 years after each payment.

A loan secured by the principal dwelling is high-cost if its APR exceeds the average prime offer rate by more than 6.5 percentage points on a first lien, or 8.5 percentage points on a subordinate lien. It is also high-cost if total points and fees exceed 5% of the total loan amount, on a loan amount of $27,592 or more in 2026. For a total loan amount below $27,592 the trigger is the lesser of 8% of the total loan amount or $1,380. A prepayment penalty chargeable more than 36 months after consummation, or exceeding 2% of the amount prepaid, makes the loan high-cost on its own.

Borrower-paid private mortgage insurance terminates automatically on the date the balance is first scheduled to reach 78% of the original property value, if the borrower is then current. The borrower may request cancellation at 80% of original value with a good payment history, and the insurance must end in any case on the first day of the month after the midpoint of the loan's amortization period.

On most refinances and home-equity loans secured by a primary residence, the borrower has 3 business days to rescind, ending at midnight of the third day. The clock starts at the latest of consummation, delivery of the notice of the right to rescind, or delivery of all material disclosures. If either the rescission notice or the material disclosures go undelivered, the right to rescind runs for 3 years instead. The creditor then has 20 calendar days after a notice of rescission to return the borrower's money and release the security interest.

A first-lien loan is higher-priced when its APR exceeds the average prime offer rate by 1.5 percentage points or more, or by 2.5 percentage points or more where the balance is above the Freddie Mac purchase limit; a subordinate lien uses 3.5 percentage points. A higher-priced first-lien loan on a principal dwelling requires an escrow account, and that account must stay open for at least 5 years after consummation before the borrower may ask to cancel it.